Qurate Retail Announces New Digital Investments and Cost Synergies

November 19, 2018: Viewership rises on broadcast and new media, QVC begins deploying HSN’s Shop by Remote app; Efficiencies from HSNi acquisition now expected to approach $400 million by 2022.

ENGLEWOOD, CO (Nov. 19, 2018) – Qurate Retail, Inc., a world-leading video and digital retailer, has announced new digital investments designed to create immersive video commerce experiences on all platforms that resonate with consumers across generations.

Mike George, President and CEO, Qurate Retail, Inc., announced the investments at the company’s recent Investor Day in New York City. The investments align with five priorities that Qurate Retail is pursuing to continue to deepen the appeal of QVC and HSN among today’s consumers:

Be the destination for product discovery.

Inspire shopping journeys spanning all media platforms customers use.

Make digital marketing a powerhouse demand driver.

Extend the conversation through the power of social media.

Enhance the service experience.

“The soul of the shopper, over time and across generations, hasn’t really changed,” said George. “Shopping is still about discovering great products, at great values, with great stories. It’s joyful, inspiring and built on trust. It lifts people up, helps them solve old problems in new ways, makes their lives easier, and connects them to the wider world. This is what we do, and this is why we have so many opportunities to evolve and grow in today’s rapidly changing retail and media landscape.”

George also announced a further increase in expected cost synergies from the HSNi acquisition, beyond the expectations announced in October. Qurate Retail believes it can reduce cost by another $50-55 million through a major new program to increase merchandise sourcing effectiveness. The company now expects total efficiencies to approach $400 million by 2022, building a powerful war chest to either reinvest in growth or add to operating income.

Qurate Retail generated $14 billion in global revenue in FY 2017 and is #1 in video commerce, #3 in ecommerce in North America, and #3 in mobile commerce in the U.S.1 The company comprises seven leading retail brands: QVC, HSN, zulily, Ballard Designs, Frontgate, Garnet Hill and Grandin Road.

Here is a closer look at George’s comments on Qurate Retail’s five priorities:

Be the destination for product discovery

“Our business model starts with being great product curators,” George said. “We’re committed to bringing our customers more discoveries, increasing product differentiation, driving strong values, and engaging customers of all generations.”

Qurate Retail is investing in an expanded digital store, adding 180 new digital-only brands across HSN and QVC over the past few months and entering new categories, such as baby, outdoor and tabletop. Year-to-date3, the company has hired over 25 people to help drive this effort. In addition, more brands with strong cross-generational appeal are launching first on digital.

Qurate Retail also is launching Qurate D3 (for Discovery, Design, and Development), an expanded function to find or develop exclusive product lines around the world.

Inspire shopping journeys spanning all media platforms customers use

“The explosion of digital media creates enormous opportunities for us to access, engage, and inspire consumers of all generations, over her video platforms of choice, with the right content, at the right time,” George said. “We have a strong advantage over other retailers or content programmers: We own all of our content, our incremental cost to create content is low, and we already have significant experience distributing content across emerging and other digital platforms.”

Qurate Retail continues to expand viewership across media platforms. In the U.S., TV viewership for QVC and QVC2 rose 5% year-to-date4. HSN and QVC continue to increase their presence on traditional TV platforms. In addition, the brands are assessing how to optimize the positioning, programming, and scheduling of the five U.S. networks (QVC, QVC2, HSN, HSN2 and Beauty iQ) to appeal to the broadest range of consumers and provide maximum choice.

Viewership on new media platforms is also growing. From Q3 2017 to Q3 2018, minutes viewed via QVC US OTT platforms (Amazon, Apple, Roku), Facebook Live5 pages and digital platforms rose by more than 75%, while minutes viewed via the QVC US YouTube page doubled.

Early next year, Qurate Retail will build on its mobile leadership by launching a new Watch App, designed to be the daily discovery destination for today’s mobile consumer, with easy access to live shows, product videos and episodic content. By liking videos, users will be able to create their own playlists, and a click on a video will bring up product details and the ability to purchase.

In addition:

The next generation of HSN’s proprietary Shop by Remote app is rolling out, and QVC began deploying the app earlier this month as well.

QVC is expanding its OTT apps, including the October 2018 launch on Amazon Fire and the June 2018 launch of a new OTT service in Germany.

Make digital marketing a powerhouse demand driver

“We are rapidly scaling our digital marketing to generate demand, showcasing our best items, complementing the power of our TV distribution, and driving new generations of customers to our new media platforms,” George said.

Qurate Retail is building an in-house marketing agency to support QVC and HSN, drawing top talent from digital marketing leaders. The team is leveraging machine learning tools from zulily to create and deploy advertising intraday to maximum effect.

Digitally-driven sales6 are growing, driven in part by digital marketing. Year-to-date3, sales for items that are promoted only via QVC’s digital platforms rose 11%, and sales for items that had not been featured on-air in the prior 24 hours rose 7%.

Extend the conversation through the power of social media

“Social platforms enable us to reach and engage new consumers, while also deepening the engagement of our best customers by fostering powerful viral communities,” George said.

Qurate Retail has built a network of influencers who can amplify HSN or QVC products and platforms with their followers. In addition, Qurate Retail has launched three social marketplaces – Ellie Sugar and Fuss Beauty in the U.S. and TILI (Try It Love It) in the U.K. – designed to reach beauty shoppers who may not be aware of the curated products and engaging experiences offered by HSN and QVC. The company also has launched its first skill on the Alexa platform, enabling users to watch or listen to HSN live and obtain information about HSN’s broadcast and products. By early 2019, users will be able to order products and check shipping updates and other account details, all via voice.

Enhance the service experience

“We recently announced a multiyear plan to reduce delivery times by two days and increase package consolidation by integrating our HSN and QVC US fulfillment networks,” George said. “This is just one example of how we are investing to ensure that our service promise stays among the best.”

The plan to integrate the fulfillment networks was announced in October. The first phase includes opening a new fulfillment center in Bethlehem, PA in 2019, as well as anticipated closures of fulfillment centers in Lancaster, PA, Roanoke, VA, and Greeneville, TN in 2020. Additionally, Qurate Retail will evolve toward a leased vs. owned model for many of its fulfillment facilities to increase flexibility and reduce longer term capital requirements.

Qurate Retail’s multiplatform approach is helping the company expand its customer base. Over the past 12 months3, new customer counts for QVC US rose 4%, with 83% of new customers coming through digital platforms. QVC US also saw a meaningful shift among new customers to customers who are 18-44 years old. Overall, the QVC US customer base is up 2% year-to-date3, with strong and stable customer retention.

Ecommerce and mobile rankings: among multicategory retailers, according to Internet Retailer.

Includes QVC’s JV in China.

To September 2018.

To September 2018. Source: Comscore. QVC daily share is the percent of total TV universe.

Q3 2017 data from July 2017 launch date.

Based on demand sales. Does not include waitlist and subsequent auto-delivery, which are 6% of total sales.

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Forward-Looking Statements

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about initiatives regarding Qurate Retail and the HSN and QVC businesses (the “initiatives”), the timing of the implementation of the initiatives, and expected benefits resulting from the initiatives, including the amount and timing of expected synergy benefits. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, general market conditions. These forward-looking statements speak only as of the date of this press release, and each of Qurate Retail, Inc. (“QRI”) and QVC, Inc. (“QVC”) expressly disclaim any obligations or undertakings to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in QRI’s or QVC’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of QRI and QVC, including each of their most recent Forms 10-K and 10-Q for additional information about QRI and QVC, respectively, and about the risks and uncertainties related to each of QRI’s and QVC’s business which may affect the statements made in this press release.

About Qurate Retail, Inc.

Qurate Retail, Inc. (NASDAQ: QRTEA, QRTEB) is comprised of seven leading retail brands – QVC, HSN, zulily, Ballard Designs, Frontgate, Garnet Hill and Grandin Road (collectively, “Qurate Retail Group”) – all dedicated to providing a “third way to shop,” beyond transactional ecommerce or traditional brick-and-mortar stores. Globally, Qurate Retail Group is #1 in video commerce, reaching over 375 million homes worldwide via 16 television networks and multiple ecommerce sites, social pages, mobile apps, print catalogs, and in-store destinations, and is #3 in ecommerce in North America and #3 in mobile commerce in the U.S. Qurate Retail, Inc. also holds minority interests in ILG and FTD as well as various green energy investments.